A Bitcoin address is a sequence of letters and numbers that serves as a digital “destination” for receiving bitcoin.

To send bitcoin to someone, you need their Bitcoin address. It’s kinda like how you need a person’s phone number to send them a text or their email address to send them a message.

Understanding Bitcoin addresses is an essential part of making transactions, especially when you’re ready to take self-custody of your bitcoin. While Bitcoin exchange businesses make it easy to buy and hold bitcoin without directly interacting with Bitcoin addresses, when you’re sending to an external wallet (either your own or someone else’s), you’ll need to understand how addresses work.

So what is a Bitcoin address?

A Bitcoin address is a long sequence of seemingly random numbers and letters that serves as a destination for a bitcoin transaction. They start with one of three common prefixes, depending on the format: “1”, “3”, or “bc1”. Here’s some examples of how they look.

• 1BgXRx8YMGKU7fc8RfTPQ2uL2ivC9cMmGj
• 3G3CxtfN4rg4ShVzVAUsM3AtGbnbs6v26S
• bc1qsfc2g86agexaht5eh8yfp3xs9q65nhnz85dq8u

Despite the differences in length or format, all Bitcoin addresses function in the same way: receiving bitcoin transactions. By viewing any given block on Bitcoin’s public blockchain, you can see for yourself the amounts of bitcoin being sent and the respective addresses they’re being sent to.

Bitcoin addresses are also commonly shared as QR codes, which is just a computer-readable format that can be easily scanned with a phone or computer. Scanning QR codes is useful for avoiding mistakes when typing or copying these long addresses.

Where do Bitcoin addresses come from?

Bitcoin addresses are generated from a public key, which itself comes from a private key–a long sequence of numbers and letters that serves as the basis for authorizing transactions. Private keys are like the secret codes that unlock your bitcoin when you want to spend, and therefore only you should have access to them.

When you use a custodial bitcoin service like Strike, address creation and management are handled for you. When you’re ready to take self-custody of your bitcoin, understanding how Bitcoin addresses work becomes paramount.

Here’s the basics of how a Bitcoin address works:

• Private key: A private key is the secret, random sequence of letters and numbers, which is typically generated by your Bitcoin wallet’s software. Private keys are used for generating public keys and for authorizing transactions through the creation of digital signatures. The most important thing to know about private keys is that they must remain secret and secure.
• Public key: A public key is derived from a private key, but it can be shared publicly without compromising the secrecy of the private key. Historically, people used to send bitcoin payments directly to public keys (Pay-to-Public-Key or “P2PK”), but today Bitcoin addresses are used for their improved privacy, security, and compatibility.
• Bitcoin address: A Bitcoin address is created by taking a public key and running it through two hashing processes (SHA-256 and RIPEMD-160) to make it shorter and more secure against privacy intrusions. A few extra characters, called a checksum, are added at the end to help catch any mistakes when copying or typing the address. Finally, the address is encoded into a format like Base58Check or Bech32, depending on the address type, which uses letters and numbers that avoid confusing characters (like “0” and “O”) to make it easier to read and share.

The final product is a Bitcoin address that can be shared publicly for receiving payments, without compromising the secrecy of the private key. When you want to spend the bitcoin that was sent to your address, you can authorize a transaction using the private key that was used to create your Bitcoin address.

Types of Bitcoin addresses

There are four basic types of Bitcoin addresses. They all work similarly, but differ in their formatting and compatibility with different wallets and platforms.

• P2PKH (Pay-to-Public-Key-Hash): P2PKH Bitcoin addresses are a legacy format and start with a “1”. These addresses are supported everywhere, but are less efficient in terms of the data they require, and therefore typically incur higher fees when making transactions.
• P2SH (Pay-to-Script-Hash): P2SH addresses were introduced in January 2015 and start with a “3”. This address format allows for more complex transaction scripts and can be used for various purposes, including multi-signature and time-locked transactions, as well as improved fee efficiency. With these addresses, bitcoin is sent to a hash of the script, and the recipient must meet the script’s conditions to spend it, offering flexibility for advanced transactions.
• Bech32 (SegWit address): Bech32 addresses were introduced in July 2017 and start with “bc1”. They support Segregated Witness (SegWit), an upgrade that separates the signature (witness) data from the main part of the transaction, thereby reducing overall transaction size and allowing more transactions per block, lower fees and faster confirmations. SegWit also makes the Lightning Network possible, allowing off-chain transactions to be settled more securely and efficiently on the blockchain.
• Taproot address: Taproot addresses start with “bc1p,” and were introduced in November 2021 to enable enhanced privacy, scalability, and flexibility. Taproot addresses allow complex transactions to appear as simple ones on the blockchain, which means multi-signature setups, smart contracts, or spending conditions can be masked, enhancing privacy and reducing costs while maintaining compatibility with the broader Bitcoin network.

Depending on your wallet app, you can manage your bitcoin addresses, including the selection of which address type to use.

How to use a Bitcoin address

Whether you’re sending or receiving on the Bitcoin blockchain, you’ll need to use a Bitcoin address. Within the Strike app you can send to or receive from a Bitcoin address, using either your bitcoin or cash balance, and Strike will convert the funds before completing your transaction.

While each Bitcoin wallet app is different, they typically follow the same procedure:

How to receive to your Bitcoin address:

1. Generate an address: Within your Bitcoin wallet app, select the “Receive” button, which will show one of your Bitcoin addresses (sometimes called an “on-chain” address).
2. Share your address: Copy the address or display it as a QR code to share it with the person who wants to send you bitcoin.
3. Receive funds: The person who is sending bitcoin will paste or scan your address into their wallet app, enter an amount to send, set a fee to pay, and then tap “Send” to broadcast the transaction.

How to send to a Bitcoin address:

1. Prepare to send: Within your Bitcoin wallet app, ensure you have sufficient funds to be able to send, then select the “Send” button.
2. Scan or paste the address: Within your wallet app, scan or paste your recipient’s Bitcoin address, being sure to double-check that it’s the correct address.
3. Enter an amount: Select an amount to send and set a fee to pay, before tapping “Send” to broadcast the transaction.

For both sending and receiving, once a transaction is broadcast by the sender’s wallet, the transaction will be added to a block on the blockchain, typically within minutes depending on the sender’s fee paid. The recipient’s wallet will monitor Bitcoin’s blockchain and detect the new transaction that is destined for one of its Bitcoin addresses. Once the transaction has been “confirmed” by being added to a block on the blockchain, the recipient’s wallet balance will be updated to reflect the received bitcoin.

After this process, the recipient now owns the bitcoin, since the only way to spend that bitcoin is by authorizing a new transaction using the private keys that were used to create the Bitcoin address. Depending on the wallet, you might have to wait for 1-6 blocks to pass (~10-60 minutes) before the transaction is considered finalized.

Once a bitcoin transaction is added to the blockchain, it’s permanent and cannot be reversed. This makes it crucial to double-check where you’re sending your bitcoin and to ensure you trust the recipient. Unlike bank transfers, there’s no way to recover funds after sending bitcoin, which is especially important to remember while being vigilant and wary of potential scams.

To learn about managing your bitcoin addresses learn about address management best practices.